Legal Battle Erupts: Swan Bitcoin Takes Action Against Law Firm for Representing Tether

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In a dramatic twist, Swan Bitcoin, a prominent Bitcoin financial services company, is suing its own law firm, Gibson, Dunn & Crutcher, for malpractice. The cause of the conflict? The law firm decided to represent Tether, a major rival in the cryptocurrency space, creating a potential conflict of interest that led Swan to claim that the firm betrayed its trust.

The Background Story

Swan Bitcoin had been working with Gibson, Dunn & Crutcher in a legal case where it accused former employees of stealing software to launch a rival crypto-mining business, Proton Management. In this case, Swan was suing its ex-employees for allegedly working with Tether to undermine Swan’s operations. However, things took a turn when one of the lawyers from Gibson, Dunn & Crutcher—who was working on Swan’s case—decided to take on a new client: Tether, the stablecoin issuer that Swan was battling.

Swan Bitcoin’s CEO, Cory Klippsten, was reportedly warned by a lawyer from the firm that it would need to find new legal counsel because of the conflict of interest. The firm had hired Barry Berke, a lawyer who represents Tether, and this raised the possibility that Swan’s interests might no longer be protected.

The Legal Conflict

This situation escalated in November 2024 when Swan Bitcoin sued Gibson, Dunn & Crutcher for legal malpractice, claiming that the firm initially “wooed” Swan to represent them against Tether, but then “embraced Tether as a client and told Swan to get lost.” Swan argues that the law firm’s actions put their case at risk and violated attorney ethics, particularly the “Hot Potato” Rule. This rule prohibits lawyers from dropping a client simply to avoid a conflict of interest.

Swan’s situation worsened when, on November 24, the law firm filed to withdraw from the case against Proton Management, citing a “complete breakdown” in the attorney-client relationship. In response, Swan demanded that the court block Gibson from leaving its case and prevent the firm from representing Tether, adding fuel to the fire.

Why It’s Important for You to Know

  1. Conflict of Interest and Ethics in Law: This case highlights the importance of ethics in the legal field, especially when dealing with sensitive business disputes. If a lawyer represents multiple parties in opposing positions (like Swan and Tether), it can create serious conflicts of interest. Understanding how such conflicts affect legal cases is crucial in any business, especially in a highly competitive and fast-moving industry like cryptocurrency.
  2. Corporate Trust and Legal Battles: Swan Bitcoin trusted its law firm to protect its interests, but the firm’s decision to represent Tether sparked a legal and business disaster. This situation underscores how crucial it is to choose the right partners and legal advisors, particularly in industries where competition is fierce and legal stakes are high.
  3. The Stakes for Crypto: The case involves Tether, one of the most well-known stablecoins in the cryptocurrency world, making it a significant legal drama for the industry. If Swan wins, it could set a precedent for how companies in the crypto space protect their interests and deal with legal conflicts of interest.

Key Points to Remember:

  • Legal Malpractice: Swan Bitcoin is accusing its law firm of failing to act in its best interest due to a conflict of interest.
  • Conflict of Interest: The law firm hired a lawyer who also represents Swan’s competitor, Tether, which Swan claims put its case at risk.
  • “Hot Potato” Rule: This ethical rule says that a lawyer cannot abandon a client to avoid a conflict of interest.

This case is a critical moment in the intersection of cryptocurrency, legal ethics, and corporate strategy. For anyone in the crypto world, it’s a reminder of how important it is to handle legal and ethical issues carefully—especially when your competitors are at the table.